Q1 2020 Earnings Call
[music].
Ladies and gentlemen, thank you for standing by in welcome to the first quarter Twentytwenty Welcome earnings Conference call I.D.'s time, all but two systems are another thing only known after the speakers remark there will be a question unanswered section.
To ask the question doing that portion of the call you. When he says press darwan on your telephone and please be advised that today's conference is being recorded now it's my pleasure to turn the cold two three <unk> good vice-president of communication.
[noise]. Thank you.
Good afternoon, and welcome to brokers financial results call for the first quarter ended March 31st 2020.
I'm trying to call today with anyone Berkeley's founder and P.L.C., right and R.C.I., So and Scott Rosenberg.
P P. and G. of our platform business, who will be available for Q. and amp.
Full details of our results and additional management commentary are available in our shareholder letter, which can be found.
Investor Relations section of our website at I.R. Dot <unk> Dot com.
The following discussion including responses to your questions reflect management is as of today March 7th.
2020, only and we do not undertake any obligation to update or revised misinformation.
Some other statements made on today's call our fourth working and are based on our current expectations forecast and assumption and involve risks and uncertainties.
These statements include but are not limited to statements regarding the future performance or <unk>, including expected financial results for the second quarter and full year 2020, the impact of the code with 19 pandemic on our industry business and financial results and the future growth in our business and our industry.
Our actual results may differ materially from those disgust on this call for a variety of reasons.
Please refer to today's shareholder letter and the company's periodic filing with the S.E.C. for information about factors, which could cause our actual results to defer materially from these forward looking statements.
You will find reconciliation of non-GAAP measures to the most comparable measures discuss today in our shareholder letter, which is posted on our industrial relations website back I.R. Dot <unk> Dot com I encourage you to periodically visit our website for important contracts.
Finally, unless otherwise stated all comparisons on this call will be against our results for the comparable period of 2019.
Now I'd like to hand, the call over 10 thing.
Thank you for joining today's call.
19, Pandemics has created a tremendous amount of pain disruption and uncertainty around the world.
Recognize that depend emus effects on rookies business is a tough question for this one is cool and so we should focus or shareholder letter on that topic.
Let me summarize what I believe were the main impacts on rocchi and screaming in general.
Dependent make is accelerating the shift the screening by both viewers and the industry.
Spending more time at home and so T.V. viewing is increasing.
Yours are selecting screaming because of its excellent content and value.
Unemployment and the likely recession or making value more important than ever.
These factors have driven dramatic increases in a new account growth rate since the pandemic too cold.
In the short term the pandemic of slowing the growth of wrote this video advertising business.
Advertisers are spending less reduced budgets mean marketers are looking for ways to invest more effectively and this should accelerate the shift the streaming advice.
A large content distribution business continues to perform well I haven't seen a surgeon f. five trials and increased t. bought activity.
We believe the depend them because accelerating secular trends were screaming and the these changes will be permanent.
Would that I'll hand, it over the Steve.
Thanks, Anthony <unk>.
She won 2020, we feed it or outlet for revenue and adjust the the dog.
Need to make significant operational natural progress also responding to be initially impacts of Kobe 19.
Well for taking your questions I'll walk through operational and financial highlights and discuss our approach to outlook given the current level of uncertainty.
We added 2.9 million incremental active accounts in Q1 in in the quarter with 39.8 million active accounts and subsequently past the 40 million active account Mark in April.
Feels a player units continued to be robust up 25% year over year.
Well average selling price decreased 7% you every year.
Rookie user streamed 13.2 billion hours and a quarter increase of 49% you're over your.
Completed the rule out of the are you still watching feature in late January which prompts users to confirm they are still watching after a period of inactivity.
Estimate that the roll out this feature at roughly eight seven to eight percentage point negative impact on the you're over your streaming our growth rate in Q1, and we expect a slightly higher percentage point impact on your over your growth rates in subsequent quarters in 2020, given the roll out of this feature is now complete.
Platform organization continue to increase with our to up to $24.35 on a trailing 12 months basis of 28% you every year.
P.C.R. shareholder letter for full financial details from a quarter, but I'll highlight a few items.
Total Q1 revenue exceeded our outlook, increasing 55% year over year, two $320.8 million.
15, the fastest Q1 revenue growth rate in over five years.
Platform seven revenue was up 73% year over year.
Two $232.6 million and represented 73% of total revenue.
Revenue growth of 22%. Your every year again came in the head of expectation from by strong player sales, especially in mid to late March as state home orders started to take effect.
Gross profit grew 40% you every year in Q1 to $141.1 million, resulting in a gross margin of 44%.
Gross margin of 56% was somewhat lower than expected due in part to cope with 19 related adverse impacts on video AD sales in higher margin sponsorships and audience development spending as well as a higher than anticipated mix of gross revenues from our D.S.P. ad platform.
Claire gross margin of 12% was higher than expected due to less promotions.
Oh in part to type inventory in some best selling products during the quarter due to cope with 19 related supply chain disruption as well as low return rates.
Layer gross margins were higher despite increased air freight costs as we thought to rebuild inventory levels.
We anticipate higher air freight costs in the short term.
Q1, adjusted even thought of negative $16.3 million exceeded our outlook due to slower than expected IBEX grow resulting from hiring slowing down in March.
She went up X. was $196 million up 76% year over year.
As a reminder, he one was the first full quarter, including the impact of acquiring Dave's use operations and personnel.
Q1 also includes approximately $3.4 million and then tangible amortization related to the data do acquisition Buffy two thirds of which is included in platform Cogs in one third in sales and marketing objects.
<unk>, one with 590 million of cash cash equivalents restricted cash in short term investments.
This includes a 70 million dollar drive down in March from my revolving credit facility, which we believe wasn't prudent move in light of current financial market conditions.
Given the significant level of uncertainty caused by the Cobin 19 pandemic, we've previously with through our full you're 2020 outlook and they're not providing revised bridges at this time.
Said, we would like to highlight some data points, we are seen so far in q. too as well as provide some thoughts on how the short term trends may manifest itself into longer term shifts in the T.V. landscape.
Exhilaration and new accounts and viewership have continued in April active accounts grew roughly 38% year over year, driven by an increase in new accounts of more than 70% you're over here.
Streaming hours grew approximately eight per cent year over year in April driven by an increase in streaming hours per account of roughly 30%.
Platform optimization has seen a range of impact since my mid March we have seen an uptick in that spot trials and subscriptions as well as increase in T.V. purchases at studios have brought new releases concurrently to streaming in light of stay at home orders.
On the other hand or advertising business has seen cancellations that some marketing budgets have declined but this has been partially offset by new marketing budgets moving to rescue from traditional T.V. given cancellation of high profile life sporty and entertainment events.
Marketers follow viewers increasingly see targeted measurable forms of advertising.
Yeah cancellation levels were most pronounced in late March now since decrease in early to mid April we anticipate that our AD business will continue to grow substantially on a year over year basis, albeit at a slower pace and lower gross profit than we originally expected for the year.
We believe the behavioral changes by T.V. AD buyers are like be positive for us in the longer term and that with more time spent at home and many households, curtailing spending in light of economic hardships court cutting in the shift to streaming will continue to accelerate.
We remain committed to our strategic investment areas into extending our competitive advantages at the end a few one however, we took steps to slow the rate of growth of our operating expenses in capital expenditures, So progress maybe slower.
Depending on the impacts of covert 19, we are likely to run adding adjusted EBITDA loss for the full year of 2020, given that much of our operating expenses are head count in facilities related and therefore generally committed in the short term.
Continue to monitor conditions, and the trajectory as a business and adjust accordingly.
Well Q1 was another strong quarter I most impressed it how well our up employees have been adapting to the rapid in significant changes occurring in our industry in the world at large.
Who has always been a company a problem solvers, so biased toward action.
These characteristics will be immensely helpful. As we all navigate the current uncertainty.
But that that's trying to call over for questions operator.
<unk> I, probably nine dared to ask the questions you need to plan, Taiwan on your telephone coverage. All you have question, yes, but the town King.
Meanwhile, we collect our boss pair.
Right outside the question is sounds are online.
Okay.
Yep, you can hear you so.
Number eight.
Was almost all 46 million and a quarter almost all upset by a P.P.N. Each can you just remind us what that Pete that purchased a property and equipment was in the corridor. That's on for Steve then you say in both a letter and you just started that you think your advertising is going to have lower <unk>.
And and I couldn't figure out what's driving the margin flowers and then my third is I see that you're still continuing to sell one out of three T.V.'s in the U.S. and one out of four in Canada, which is awesome does this help your negotiating leverage with like T.C.L. and these other T.V. two heads and sort of trying to get you guys.
A rabbit share do they need your more now in at post <unk>. Thank you so much.
[noise], Yeah Halo or this is Steve I'll take the first one yeah. The the P.P.E. the expenditures on that are largely related to the headquarters build out.
We are we've been scheduled to complete the next phase of our build up here in Q. too so that's largely related to to that.
Okay.
I think or second question.
Yes, yeah sure more on on the second one we we actually said that you know relative to original expectations that the the AD business would substantially grow but be it at lower expectations in terms of revenue and gross profit, we actually say gross profit not gross margin, which.
Is related to Oh.
The revenue growth will be slower than originally anticipated we didn't give a directional call on the actual margin itself.
Gotcha, Okay and then this is gone T.V.'s negotiating leverage with your T.V. matters.
Yeah. This is Anthony Yeah rookie T.V.'s that program is doing really well you know in general we're seeing very strong demand for road through products, New accounts are up over 70% in the last few weeks, which is tremendous growth. Both players M.T.V.'s are doing really strong.
In General you know the rookie T.V. program.
Means a lot of benefits to our partners <unk>.
Everything from you know strong consumer demand low returns.
Great software, we managed to suffer updates we help with.
Bringing a factories, we do all the engineering.
We do retail promotions I mean, there's lots of benefits to their brains and there's lots of reasons why <unk> <unk> I'd love to program and we think you know it there's still room I mean, you know we have a share of one in over one in three smart T.D. sold in the U.S.R.I. Rookie T.V.'s These days and.
I still think there's room to grow that.
Thanks for all the post <unk> should I read throughs, Anthony Super helpful to have your opinions on a lot of those big issues past <unk>. Thank you.
Thank you thank for.
I don't care.
My next question <unk>.
Oh good afternoon.
Send a letter and then the prepared remarks about budgets moving from linear to row cool.
I'm sure you know you're not going to quantify how much moved over but can you just give us relative sense, you know undergrowth <unk> either sequentially or a year over year that moved over and then perhaps more importantly perspective on the sticky notes of these ad dollars.
Co the particularly anticipation of life's sports eventually coming back at some point and then just a follow up a clarifying question for suit you talked about obviously through mid March in late March that we've proved small AD supported models cancellations, but I believe you talked about seeing decrease dad cancellations in April.
Can you just maybe provide some were color he's starting to see her advertisers come back and if so some of the video advertising coming back in the call you could add that'd be great. Thank you.
Hey, Ralph's got here, let me take that in parts first so I'll, just say to the overall add marketplaces down and <unk> is not immune to that that said, we are much better positions and linear television just a couple of stats.
Prime time linear consumption is down 18% year over year from mid March to late April for adults under the age of 35 half of their T.V. time.
Over the last month, it's been done on L.T.T. in streaming instead of linear Meanwhile, streaming in Rhode too is 80 per cent in in in April. So you know right. There in a microcosm you can see a significant shift in <unk> in consumer habits.
The you know what we're observing here and what we believe is happening is is that major disruptions are going to accelerate the change that was already underway here between linear and no T.T. a disruption of the of the order that we're seeing here. We believe is going to force marketers to reassess their assumptions about how they invest in linear.
And to not overlook the caveats in the growing relative audience of other T.T. a relative to linear I I think we'll see this disruption play out in the appearance for example.
Which are already being significantly disrupted and the best analogy that I'd offer for what we think we play out here between linear and no T.T. is what happened to the print business in the early 2000 print had been seating audience significantly to digital media 2003.
2008, but it took the 2008 2009 recession.
Really reset investment levels in print it had been sustained through 2008 and coming out of that recession investment levels never really came back to <unk> prior levels in print I I think that we'll see something similar to that play out with linear were certainly linear television will remain.
Major medium spending will come back, but it's likely in our view not to come back in the way that that it that it had been and.
Certainly.
You know even indicate you mentioned sports, but even the case of sports what we we think that this disruption will for so reassessment broadly by marketers.
[noise], Great and then just Steve on the the comments or anybody wants to answer on or anything that you saw come back in terms of bad spend in April.
[noise] well why don't I <unk> I don't think that question as well we did see sorry, I missed that part of your question. We did see enough taking cancellations in a pipeline slow down in mid March since then in April we've seen it stabilize.
You know we had a great Q1, Ah Argh Monotypes video Ad impressions.
<unk> doubled came close bought for coded and while the rest of the year is uncertain, we still expect substantial growth in the AD business through the year.
Great. Thank you.
Yep.
Thank you.
Next question, if they're Israel with Bank of America.
Right.
No question.
The first another question on on gross margins <unk> due to make mixed shift between the V. do add soon subscription continuity send versus the impact of just lower golf margins for the video on business and then how should we think about gross margins into two and.
Potentially after advertising budgets normalized.
[noise] Yeah is it Steve.
Yeah, what we said was in Q. on on the platform margin side. It was lower than anticipated there're a couple of factors one was <unk> related cancellations and weakness hit a combination of our advertising businesses, including the AD sales business, which generally operates around a 50 plus percent gross margin.
Profile as well as higher margin sponsorships and audience development and that that's why there is a bit of headwind on the margin. We also.
Greater than anticipated mix of gross revenue vs. Net revenue within the data do D.S.P. So as a reminder, that does not impact gross profit dollars from the D.S.P., but rather you know the revenue profile as well as the margin. So those are the biggest pieces in terms of you made it.
Comments about the the video the video AD sales margin being down it actually was in line with expectations or slightly ahead of expectations for Q1, So that was not a contributing factor for Q1.
Okay that that's helpful. And then on on active <unk>, you only see saying pretty strong enough to look on the girls than you and you were talking about even stronger.
Like the the <unk> continuing in April I'm, just wondering where effective it <unk>, it's 40 million here and that that view the that it's approaching kind of saturation in the U.S., how how far do you think you can keep them growing up to the constantly U.S. and in order to be free you agree with you also talk.
About sharing some additional metrics on your international growth discovered 19 kind of impact your decision their own Sharon any additional information and things.
This is Nancy I'll take the the growth potential U.S. I mean, there's there's a lot of room for rookies to grow both domestically and internationally.
You know, there's probably a billion households around the world that have broadband and they're all going to switch the streaming so you know.
I mean, if you just look at the recent numbers I mean definitely being salary to buy Toby, but seven over 70% New account regrow through every year is very strong so.
I I do you think there's room to continue growing acted accounts I don't think we're reached saturation.
Yeah. He's a this is Steve I'll I'll take the spectrum parse yeah. We did mention that we thought at some point it would make sense to break out the international results or provide a little more color on that.
But that likely was sometime in the future we remain committed to international as well as or other strategic investment areas. Although the the timing on such plans may get impacted depending on country specific conditions as covert pandemic and the resulting economic issues roll forward.
But as we said previously that that that disclosure like we will not for in the short term.
Okay. Thank you.
Thank you.
Our next question.
Well, the Guy <unk> <unk> roughing bronze.
[noise]. Thank you, Oh, Hey, Steve they actually commentary from the gross margin and particularly the video.
Margin sort of holding that are very helpful or maybe just a bit more.
Detail on the gross profit side you mentioned the.
D.S.P.
Mix of revenue just trying to get a sense of I know that early in the assume you're.
You know talking about the ones you add launch so maybe it's a specific question in terms of the mix you saw on Q1 sort of what your objectives are near term and long term with that.
<unk> platform in terms of you know go to market pricing and and how that me impacts.
So gross margin going forward in terms of course I'm sorry here on gross profit going forward and then just also on the T.V.S. five just curious again the mixed there you mentioned in the sure whole letter that that was that stepped up.
In a quarter or just trying to get a sense of you know maybe how much well this stuff up that was in in how much of that was rocchi channel versus off a broker channel given that the margin.
Differential there thanks.
And Mark This is Scott, let me take the more strategic into your question about the one you launch then I'll hand, it to see her shit personal commentary on the financial aspects. We did do a very substantial relaunching rebrand the the D.S.P. to the data Dude capability that we bought in November we've tightly.
Integrated the capability into our AD stack, we integrated our first party identity and so our our data targeting data E.C.R.R.R. row comedian measurement capabilities, it's a big milestone for us as a company and realization many that goals that we set out to chief when we acquired.
Yeah acquired data zoo, it it's going to allow advertisers to reach for out of five U.S. households across <unk> needy or other O.T.T. platforms desktop in mobile and it's equipped with fundamental capabilities that we think strongly differentiate relative to other D.S.P.'s, namely that identity and data in so that we have.
As an add scale platform or the first party consumer relationship and that that data equips us to help advertisers reach more users reach more in the Tory do better measurement and optimization, yeah, and so specifically in answer to your question. Our goal with that product is really to expand this out of business. We do with the advertisers did not just sell them media, but.
Platform that help them invest in L.P.T. and all media more effectively.
Excited about progress we've made on that platform C. do you want to take the the the the solid questions from Mark.
Yeah sure. Thanks got Hey, Mark Yeah, just on platform margins in general if you think about you know the different pieces you have the video add business, which traditionally is run at a 50 plus percent margins.
Sponsorships and audience development as I mentioned higher margins and then the other side of the equation is the content distribution pieces of platform. That's the subscription rubbed shares and <unk> those run at very high margin. So certainly you know it's a short term trend, we'll see where it goes but a an uptick.
In a espod trials and subscriptions as well as <unk> you know, we'll we'll increase those high margin segments. Those are for third party yaps within the <unk> channel. The premium subscription based is is on a gross basis and so that that would be a different m- margin.
Profile you mention the the sort of D.S.P. platform.
S got mentioned with the one view, that's getting tightly integrated and so you know we we anticipate that you know kind of the gross to net will stay the same or potentially shift more to net treatment overtime as as it gets more integrated into the the standard rescue advertising business. So you know we're not providing for.
No guidance on that but the those are some of the different pieces and and how trends might affect them.
That's what takes confiscate appreciate it.
Thank you.
Hi next question, Michael Nice <unk>.
Thank you guys. Good afternoon, a couple of for me can you talk about.
Maybe what percentage of your advertise your base uses you're targeting functionality and perhaps even your direct response functionality compared to maybe just more of a broader television by I'm also curious if you can talk about how you are approaching the up front. This year given given the the you know kind of dislocation there I know, it's something that you've been more focused on.
So how are you approaching that and and are you expecting to grow your mix. There and then just finally you talked about.
You know audience development spend proud to be negatively impacted by coded and I I'm, a little bit surprised just because of of the demand for streaming it seems like a great place to put advertising dollars to work. So I'm. Just curious if you were surprised as well and and maybe what you're seeing in terms of the trend now thanks.
Yeah.
Oh sure Michael Scott here. So first off I'd say that are are advertising clientele has diversified rapidly over the course of the business and especially with the advent of a D.S.P. offering and the ability to access advertising across a broad number of.
Platforms with data and optimized to result, it is accelerating the breath the clients, we serve as well as diversification into more performance or D.R. type advertisers as you suggested so <unk> very fortune 500, Hattie, but that's rapidly diversifying as we grow.
And data and targeting machine learning are essential ingredients to advertisers as they choose to news their T.V. budgets to O.T.T. and we we have that in in spades as as scale platform with with a deep first party relationships.
Your second question was about the Upfronts. It is our view that the traditional T.D. up fronts will be significantly disrupted are being disrupted I mean.
<unk>.
Life pitches would be going on now most T.V. networks at flip that to a virtual presentation.
Programming production is paused a lot of fall programming will not be available and many folks are talking that shifting the traditional T.D. up front to a counter year, which you can hear basically as a quarter shift out of the big investment decisions that brands typically making the up front Oh.
This we think spells uncertainty and ultimately a catalyst for marketers to reconsider what is traditionally a very heavy investment period for them and we do think that the fundamentals O.T.T. will shine through as marketers reconsider.
They're they're up front investments and ultimately money will move out of the the up front, indiscreet or and especially into Oh tea as an alternative so we plan to continue to as we have for the last few years participate in the up front process and be aggressive there and we think are offer.
Is especially strong and that the the stats and the shifting consumer behavior during coded speak to just how important it is for marketers to news money to reach consumers are no longer reachable in linear television.
Thanks.
<unk>.
Yeah go see I think I always just going to <unk> I was just going to jump in and say that I think you know one of the trends.
That's the current pandemic on its impact the economy's do celebrating his desire for free T.D., which is an area that <unk> leads and so you know products that we have like the rookie channel or super strategic to us and very important and we think that.
Their growth is going to probably improve.
Above is already robust rate.
Thanks, any thoughts on the audience development trend and given a a greater streaming.
Yeah, I'll comment there you know I I would say audience development is is part of our category of entertainment marketing and we are seeing next effects right now broadly, but you are right that and as we highlighted in our shareholder letter we are seeing a surge.
In subscription services in free AD supported services.
That's especially clear in the premium subscriptions offering inside of the Rocchi channel, which has seen a significant growth in in trials, especially the services have offered extended free trials and so we do see our content partners leading in.
To work with us to market their services and and in general see <unk>, you know fare better robustness in the content side of our business.
Thank you.
Oh yeah.
I'm next question Cheyenne perpetuates surfing on.
[noise] Hi, this is also push.
<unk> so.
I just wants to task.
Given to count probation sports sports budgets are you can you talk about how you're seeing bend your T.V. sports budget move over to.
Hello.
Oh T.T. in general and what you could look like in the coming quarters.
Yep, we did see a lot of action. This has got here. Thanks to the question or we did see a lot of quick movement by brand to realize that they're heavy investments against sports needed to get reallocated. Moreover, some of these brands had messaging challenges they might have had messaging or creative.
Weren't relevant or felt less relevant while people were sheltering at home and so that actually drove a lot of interest in working with <unk> to create new ways to reach consumers, especially a surging streamed we launched within a week of shelter at home kicking off somebody we called home together, which isn't aggregation.
Free content news and free movies and T.V. shows we have brands like T. mobile turbo tax taste Marianne come in and sponsor that experience and you know help solve a problem for them, which is to how to reach consumers. During this this phase, but it also helped US spring forward a bunch awesome content for Arkansas.
<unk>.
This is Anthony I would just that that got it you know a a clear trends that we're seeing here is that the pandemic and all these various aspects are accelerating trends. So we've already.
Started before the pandemic pandemic, particularly the transition to screaming. So you know things like lack of sports people a desire to save money.
Towards value those kinds of trends are accelerating screaming in the end are accelerating court cutting and and sports will come back.
But all those court cutters are not going there refined for their cable. So you know I think a lot of these changes.
Going to be permanently.
Got it.
Can you talk about how pricing trend in one two and how you expected to trends and to come before.
Well Oh T.T. in our view remains at premium product and has historically commanded.
Premium pricing, if we think frankly, that's just a function of it being a more effective media. It performs well it it's got better data better measurability and with technology like one view the opportunity to optimize too.
Down funnel results that marketers care about so.
We're not.
We're not certain how how pricing on how the overall market plays out over the next couple of quarters, but we are much more heavily focused on.
Attracting T.V. AD dollars into T.T., that's that's our focus as a as a company and we do see that there's an opportunity to accelerate that transition.
Okay. Thank you.
Thing too.
Questioning.
Those kind of thing with open her and then.
Tanks two questions. So first what will rogue, who advertisers be able to do through the data do assets that they could not do before.
And then what can you offer what they advertisers who historically, we're not look who advertisers and let's say they were price sensitive advertisers and the second question any thoughts on when and if you might provide more detail on international active accounts and screaming out.
So we can get a sense of your progress their banks.
Yeah, Jason I'll take your the first part of your question there are fundamental advantages behind the one you platform.
For example in our recent relaunch, we we anchored the device graph in our first party identity and so and we think are are data into the system. So that marketers can use that tool set to achieve better scale. When you've got more accurate identity info you can more confidently reach a larger consumer base and you can access more.
<unk>. So that's a key advantage and then the data and then identity is of higher quality and so it will enable marketers to measure better and ultimately to optimize two results for example, buying an add on row Q. and then optimizing it based on a site visit to the advertisers website or the purchase of.
Product. So those are fundamental new capabilities for <unk> to be able to offer and they are differentiated from the market place because they're anchored in our at scale first party data. The other essential difference that I'll point out is by making this data available in our D.S.T., where enabling marketers to use it not just when they.
We're buying media from broke it but when they're buying from publishers on <unk> as well as media offer okay and that is also a fundamental and do offer for us that we're very excited to take to market.
I'm Gonna, let Steve take your second question.
Yeah. It <unk>, Steve So in terms of international I mean is empty mentioned before it's it's a very big growth opportunity for US you know we'll be focus initially on building scale right now the new markets aren't particularly material amount. The vast majority of our accounts are in the.
S. Although internationals is continues to grow nicely.
So it will likely be down the road when we provide some breakout and then when we do it will likely be in the form of some of our key operating metrics kind of breaking out international versus domestic on account growth in in our too [noise].
Hey.
Alright.
Okay, how much.
Next question from <unk> guns at 10.
Great. Thank you for taking my questions. So glad to hear that everyone's doing well. So the first question I had Anthony touched on this little but I was hoping to get an expanded his comments on the mix of s. versus <unk> consumption.
I have a follow up after that.
[noise].
<unk>. This is Anthony I think Scott, we'll take that one.
Okay, Yeah, they're both yeah. Thanks town, they're they're both up significantly relative to overall streaming hours growth, which was of course robust itself. So we're seeing strengthen both oh segments on the subscription side. It's.
You know in in part consumers moving a bunch of their viewership to O.T.T. shopping for new subscription services and taking advantage of the extended free trials that are available in the road the channel and from services like Disney plus So you know we've seen a significant uptake from consumers in those services as.
I was <unk>, although it's early good conversion of those consumers into paid and then value matters a lot to consumers. It always has but it matters, especially now and so free really resonates we've seen a surgeon family viewing yeah in <unk>.
N. news and then when people get tired of news in a in entertainment.
And so that's driven a significant increase in that sporn services like the Rocha channel and elsewhere. So that so they're both up and both driving to the significant increase in streaming hours that'd be so that'd be seen since <unk>.
Great and then for my follow up I want it to know because there wasn't sure how to think about this so to the extent that you have a new T.V. in film production stopped.
How could the disruption in new content affect rove, who down the line.
Yeah, I I think yeah go ahead Anthony Huh.
Right.
Yeah, I think it's.
I think that it's going to take a while before.
Those changes start to have the material in fact, there's just so much content that's already been produced in a very large backlog.
Unless god damn thoughts on yeah.
Yeah, what I'd add to that is it's picking problematic for for services networks that are you know who's core proposition is original or new programming.
You know for for for for US, it's and level it levels the the the playing field and.
You know as Anthony said, there is just such a wealth of great content out there and a desire for free adds 40 content. So for US. It's it's staying the course in continuing you invest in the breast and death the content available in there or the channel.
Great. Thanks for talking I mean, there's there's there's over.
Thanks, I was just going to comment there's over 40000 titles in the rookie channel. So there's a lot of content.
[noise] wonderful thanks.
[noise] thinking how much.
Hi next question some days it back I went back and back.
I think so much for the questions I have to sort of related to bigger picture ecosystem trend. The first thing, we've seen increase and and I'm an activity among a bod.
Providers that our feature prominently on your service I was wondering if he could comment on how the purchase of the services by bigger media companies might affect your monetization going forward and if you already seen a change in those relationships plus bar and second related to.
T.V. manufacturers they've been a couple of high profile manufacturers that is announce that they're investing heavily in their own operating systems, which runs a little bit counter Anthony to what you've said in the past about I'm expecting most T.V. manufacturers to having outsourced operating system in the future are you seeing a shift in any way.
Okay.
Dynamic isn't that T.V. manufacturers are preferring to source or to do their own operating system do you still believe going forward that most will be out tours to providers like yourself.
Yeah filling your first question free AD supported television Susan area that we've pioneered on where a leader in and.
No I think a lot of companies are realizing it's going to be a big big growth area. You know T.T. no turns but in terms of our economics, you know our well I take a step back one of the key value propositions, we try and bring to our customers are end users is that we provide a lot of free T.V. and a lot of options.
One of those options as the rookie channel and it's a great option, but there are other options on the platform as well that are also have great content.
And you know our business model is such that we you know we women are partners <unk> and we might have ties.
Content on a platform, regardless, if they're watching the real good channel or if they watch it on you know another AD supported channeled is also available on <unk>. We generally have you know economics and all those situations. So they pitcher for US is more free content as good. It's just keep opposite value proposition for our users and we monetize advertising in a bunch of different ways on our platform and.
Free content are awesome.
In terms of.
V.L.S. is.
You know I I'm, not sure, which can be companies, referring to but but in general you know I think the.
You know the amount of R. and D., an effort and expertise it takes to build.
Competitors platform in today's world for television, it's huge and.
And it's something that you for needs to have started years ago, and so I you know I I just think that the economics.
Don't allow any any single company to.
And then a lesson just run on their platform it needs to be advertised across a large spaces of T.V.'s to be about c. viable economically Anthony viable for content partners. I mean concept partners are not interested these days.
Building a bunch of different after they've already got two new platforms and then you to support so I I feel strongly still the the numbers of L.S. is we're going to consolidate in the C.D. space and then.
We have a leading position today and that we will keep that leading petition scenario, where incredibly focused on and you know wrote the T.V.'s doing really well and then yeah I would also just that.
We're actually the only companies still but it's still an operating system purpose built for for T.V.'s. You know every other operating system is either using H.T.M.L. is to design for desktop or using Android, which is designed for a mobile for and so it just gives us fundamental advantages. The fact that we are completely focused on a purpose built operating system.
For T.V., and it's working well for us.
[noise] right next to us.
<unk>.
Our next question if <unk> <unk> <unk>.
Okay. Thanks, Yeah, Scott I wonder or Steve could you talk a little bit more about the ads business and I know in the back of Europe and somebody may have asked us earlier on and I apologize you can quickly answer the question that that was the case, but if they didn't I know at the back of your press release, you talk about near term challenges in the ads business, but earlier.
Can you talk about seeing a substantial revenue growth on a year over year basis, and I I don't know if anybody out there except for Amazon. It's doing substantial your of your AD revenue growth. So it sounds actually like your business is really holding up can you comment on what happened to your ads business. During the course of the March quarter did it really.
Did it did the grow for each day relatively robust and if you.
If you can't talk about the linear if you don't want to talk about the linear already have it talk about which areas or you're seeing signs at the <unk>, a short term challenge or near term challenges as a particular verticals that have gone dark on you that sort of thing, but that the that that that you know they're very few I don't think there's any company that's doing substantial revenue growth on a year over year basis, so that actually sounds very positive but.
Am I missing you're you're also warning us at the same time thanks.
Yeah.
I think you got you got it right there mark it it that's just it we we are seeing strength you know year over year growth. It's not what we had thought it would be at the start of the year, but it's still robust and for US. It's just the clearest indicator that the fundamentals of.
C.T. is dreaming advertising or as strong as ever that you know this this.
Disruption that were in the middle highlights the consumer trend and the acceleration towards streaming and it also sets up some tough choices for marketers as they scale back their budgets they got to be a lot more discriminating about where they put their money.
And in times like this performance Measurability R.Y. matter and you go back and you revisit all your assumptions and caveats and those had been piling up in linear television you know the realities investment in linear television is held up for years now even as linear television is.
Suffered double digit ratings declines year over year, and it's not <unk>, we all know it's not sustainable and it's disruptions like this that we think are encouraging brands to to rethink their media mix <unk>.
The whole at a macro level that business is going to be down, but we think that we come out the other side relatively speaking stronger.
I don't know that answers your question, but that's that's the the the the the like somebody say good Anthony sorry, Oh, Yeah, I was just going to comment that prior to cope with you know the staff were 29% of.
Doing what's happening on screaming, but only 3% of T.V. AD dollars, we're going through screaming. So that's clearly something that's going to change and I think to me. That's the biggest take away from what's happening right. Now is that the pandemic is forcing things that we're going to change anyway.
To change now to make for companies and buyers to make those.
This is just to change their behavior and I think that's gonna be the big outcome of this.
Because one follow up Scott are there any particular areas. So just I'm a negative side are there particular verticals or well Where's where's the most pronounced weakness from where you look at it in terms of you know ads spend.
Well our business is very diverse it it looks like advertising generally with some caveats you know we have we overindex on entertainment because we're an entertainment service entertainment platform, but but yeah. We saw we saw a down tick in categories like like everybody else travel you know.
Quick serve restaurants. These are verticals that you know had to wait quickly recalibrate, they're spending as their revenues went down but there. There are other verticals that are still going strong and still investing and a and looking you know at the movie industry me as an opportunity to.
<unk> next their investment and change up their messaging to reach consumers you just can't be be reached in linear anymore.
Okay. Thank you very much.
Yeah.
Thank you.
<unk>.
Hi, This is Thomas yeah, calling for benefiting from two questions first.
Following up on that point on acceleration of that when your T.V. budget reallocation has that pricing differential between a rock who's the video advertising business in traditional T.V. Leiden didn't greasing Monson, what's been your philosophy, the opportunity to hold or even wide in that premium C.P.M., given d. accelerated share shift that you're seeing and doing.
And the value that near delivery.
Well I think the shift is not driven or impeded by by pricing as much as marketers following the audience in in the cases are coded circumstances being prompted to revisit more aggressively their allocate.
<unk>.
Yeah as I've mentioned in previous cause work less focused on pricing more focused on providing the solutions.
Better measurability better or a wide.
Markers can achieve with a T.T. I think the value proposition of a T.T. is is <unk>.
Strong as sound is ever and.
And it's ultimately that that fundamental advantage of capabilities as well as the growing reach.
And the Unduplicated audiences that O.T.T. alone can deliver that is going to bring dollars over two O.T.T., it's not it's not really about pricing.
Yeah that makes sense and secondly on the long term gross margin that great as the way the long term balance of girls drivers advertising will likely remains the growth opportunities. These still see platform origins stabilizing the 50 plus percent range or does it growth that you're seeing on the transaction all the O.D. or something.
Inside change your view on how the long term mixed could look like over there.
Yeah, the Steve Yeah in terms of right now, we're we're not providing any.
Any updated outlook at this point.
Okay.
Yeah.
Phone care.
<unk> last question, it's quite psychiatrists.
Hi, everyone. Just a quick question I know.
Last quarter, you guys mentioned that you had nine.
Smart or D.V. brands in Mexico.
I was just wondering ice you could shed some light how things are going there.
And if you know.
And how about how things, they're going even with the Corona virus.
Hey, this is Anthony things are going well, new Mexico, I mean, they're obviously have challenges.
Like everyone else, but we're still selling T.V.'s and players in Mexico.
And we're you know.
We're we're bullish on the future I mean in the short term.
A little less clear.
But that you know it's going to I think it's going to be a huge couldn't you market for us over time.
Okay, Great and then I know mention went into Bruce ill is that is.
Oh sort of your.
You're a fetus and market that you want to reach.
Well I mean, Marcus that we've launched in.
Most recently, our Brazil, and the U.K., we launched rookie T.V.'s wants the rookie channel in the U.K. recently.
S.T.V.'s in Brazil.
We launched Mexico before that adding more excused and more content as well and then mess Mexico market, Canada of course, we're in so.
You know, we're we're adding we're continued to add more countries and we continue to.
Build the depth of are offering in those countries, whether it's adding more T.V.'s are more player excuse or.
You know more content partners more retailers that for thing.
Can can you share I mean, where are you guys targeting next like if there are specific continent.
You're going to go to.
You know, we just don't talk about our feature.
Product plans on lunches.
Okay.
Alright thing.
<unk>, and then and I will like to turn the cold back to our T.L. Anthony word for his final thoughts.
Thank you operator, and thanks to all of you for joining today's calling your ongoing support.
Wherever you're listening from I hope, you're staying safe and healthy <unk>.
We're pleased the more people are choosing rocchi than ever and the screaming is becoming an even more important part of People's lives look forward to speak and see your next color.
Thank you.
<unk>. Thank you for participating in today's content.
You mean nowadays.
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